6 tips to save a large sum of money quickly

PHOTOGRAPH: Saranya Loisamut, 123rf.com

Need to save a lump sum quickly to buy a new car? Or looking to accrue capital to start a business? Start by setting SMART goals for each of your big-ticket expenses, says Vincent Tey, executive director of Providend Limited, an independent private wealth management firm. That means setting targets that are Specific, Measurable, Achievable, Realistic, and within a Timeline.

When estimating how much you need for a big-ticket expense, Vincent advises adding 10 per cent more to your total target amount as a buffer. This gives you a clearer picture of how much of your income you should apportion to each expense. 

With your goals set, you should now work backwards from each lump sum and determine how much you need to set aside each month to save enough by the deadline. Then, use these clever saving strategies to achieve these goals.

 

1 Track your spending
Create a detailed income and expenditure statement immediately, says Vincent. Categorise your expenses into fixed and variable ones, and be diligent in recording and reviewing your finances. “Review your total expenditure pattern at the end of the month,” he says.

This allows you to observe what you tend to spend the most on. 

Michael Tan, senior account manager at GYC Financial Advisory, says an easy way to do this is to keep an excel spreadsheet.

 

2 Cut back
From your expenditure statement, identify areas where you can cut back on. Rank your expenses by priority. “It’s all about choices,” says Michael. Always ask yourself whether you need something and what purpose it serves. 

For example, if you’re planning a family holiday, ask what you value about the trip. Is it the beautiful scenery, or simply the time you get to spend with the kids? If your answer is the latter, then skip the expensive tour of Europe and opt for a cheaper destination in Southeast Asia.

Sim Weiping, a professional certified coach at Executive Coach International, says one way to scale back is to cross out three expense items at a time until there is nothing left. “The order in which you cross out the items would give you a sense of what you can cut back on,” she says.

You can even review your insurance plan to see if there is unnecessary coverage you can cut, to save on your monthly premiums, says Vincent.

 

 

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3 Avoid emotional spending
“Do you spend money on a whim or go on shopping because you had a bad day?” asks Weiping. “When do you usually splurge the most on things you don’t really need?” Be aware of those times so you can put a stop to them. 

“Go for a jog or make someone’s day better. Do something else that makes you feel better instead of going for retail therapy,” she advises.

 

4 Reduce your credit card limit
Doing so will train you to be disciplined in your spending, says Weiping. While you may not spend to the limit on your credit card, having a reduced credit limit will make you more mindful of what you do spend on. “What’s also great is that it helps you to avoid those huge credit charges when you overspend,” she says.

Alternatively, Vincent suggests leaving your credit card at home and using cash instead. Withdraw a predetermined amount of cash for the week and restrict yourself to that amount, says Michael.

 

5 Automate your saving
It can be difficult to stick to your savings goals. Get an insurance savings plan or open a monthly savings account with your bank to force yourself to do so, says Anna Haotanto, director at private investment firm Tera Capital.

Weiping adds that you can also set up an auto transfer to a separate account meant solely for your big-ticket purchases. “Most Internet banking services allow you to transfer money to another account on specified dates in the future. You can set up these transfers when you know you need to pay a big sum in the next few months. This will help you to control your spending,” says Weiping.

 

6 Create constant reminders
Make your saving plan known to your friends and family so they’ll not only be aware of your potential change in lifestyle but also be able to encourage you, says Vincent. He advises getting a close friend or family member who is a savvy saver to hold you accountable to your goal.